It may be equal but is it fair?
01 October 2019
This article was featured in the October 2019 issue of the magazine.
Helen Hargreaves MSC FCIPPdip, CIPP associate director of policy, discusses the issues, research, findings, and developments
“Every job from the heart is, ultimately, of equal value. The nurse injects the syringe; the writer slides the pen; the farmer plows the dirt; the comedian draws the laughter. Monetary income is the perfect deceiver of a man’s true worth.” I’m sure there will be few if any of us who disagree with these sentiments expressed by Criss Jami, author of Killosophy, but for many of us the reality is still quite different.
Equal pay versus pay disparity
Equal pay means that men and women in the same employment performing equal work must receive equal pay, as set out in the Equality Act 2010. It’s the law, and employers must abide by it. This applies not just for salary, but to all contractual terms and conditions of employment, such as holiday entitlement, bonuses, pay and reward schemes, pension payments and other benefits. Leaving aside the debate over what constitutes equal work, the law is quite clear.
Pay disparity, or to be more specific in terms of men and women, the gender pay gap, is the measure of the difference between men’s and women’s average earnings. It is expressed as a percentage of men’s earnings and, according to the Office for National Statistics (ONS), the gender pay gap for all employees in 2018 stood at 17.9% down from 18.4% in 2017.
Changes to the Equality Act came into force in April 2017, meaning that employers with more than 250 employees are legally required to report their gender pay gap figures by the end of the financial year. Organisations employing fewer people than this are not legally required to report their gender pay gaps, but some smaller firms have started to do so. As well as reporting the actual numbers, employers must also provide a written statement confirming that the calculations are accurate and provide a narrative to explain why a gender pay gap is present and what the organisation intends to do to close it.
But even though the second round of mandatory reporting for organisations with more than 250 employees has passed, with data showing that the gap has closed slightly, complaints of inequality and disappointment at a lack of progress are back in the headlines. Second time around, employers may find explanations are harder to come by.
Just because a gender pay gap exists in an organisation doesn’t necessarily mean that unlawful discrimination is taking place. A gender pay gap can be caused by a range of factors such as having fewer women in senior or more high-earning roles or more women working part-time. But even if an organisation can explain the reason behind its gender pay gap, that doesn’t mean that they shouldn’t examine their results to see what they can do to address it. An approach taken on board by the BBC.
Having received much adverse publicity for the salaries paid to high profile male and female presenters, the BBC has published its 2019 gender pay report well ahead of the 30 March 2020 deadline. The organisation says that its gender pay gap comes from having too few women employed in senior roles and the fact that more women than men are in the organisation’s lowest pay quartile; it believes that 6.2% of its median gender pay gap is driven by these structural concerns. Currently, 43.8% of leadership roles are held by women.
But the BBC says it is committed to closing its pay gap by the end of 2020 and delivering a gender pay gap of 3% or less in each of the BBC’s career level bands.
...statement confirming that the calculations are accurate and provide a narrative...
It’s not just gender
Gender is only one area where pay disparity exists, something the BBC acknowledges within its report this year which reveals that the BBC’s ethnicity, disabled, part-time and LGBTQ+ pay gaps already sit within their +/- 3% target. But the BBC is unusual in publishing these results as only three per cent of large companies have voluntarily revealed their disability and ethnicity pay gaps so far. This fact is not lost on the Equality and Human Rights Commission (EHRC) which, in its research report published in August 2018, identifies significant economic benefits to decreasing pay gaps. The report suggests that improving the employment rate and workplace progression for people from ethnic minorities could contribute £24 billion to the UK’s gross domestic product per year; and raising the participation of disabled people could reduce the annual £100 billion cost of people being out of work.
This year the ONS has, for the first time ever, analysed ethnicity pay gaps in Great Britain, using newly reweighted earnings data from the Annual Population Survey. It’s inaugural report reveals that Chinese and Indian ethnic group workers have higher average earnings than their white British counterparts but the data shows that all other ethnic groups have lower wages than white British workers with employees in the Bangladeshi ethnic group having the largest pay gap, earning 20% less than white British employees. On average, ethnic minorities earn 3.8% less than white ethnic groups.
The EHRC is working to extend the focus from gender pay gaps and make employers aware of the drivers of inequality in work for some ethnic minority groups and disabled people. Employers collecting data on ethnicity and disability, including on employment and pay gaps, will help the measurement of any inequality. Because, as the BBC highlighted in its report, the aim of measuring pay gaps is not just to assess the size of pay gaps but also to understand how they have come about and identify potential solutions to addressing both the causes and the resulting pay gaps. Once we can understand the causes of differences in pay, which will be different across gender, ethnicity and disability, this can help employers to address pay gaps.
It is against this background that the government published its consultation on ethnicity reporting in autumn 2018; at the time of going to press we are still awaiting the government’s response to the consultation. However, there are a number of challenges around collecting, analysing and reporting ethnicity pay information in a meaningful way, not least that there is no legal obligation for individuals to disclose which ethnic group they identify themselves with or on employers to collect ethnicity information.
EHRC research found that 60% of larger employers (250+ employees) collect data on ethnicity. But even when employers do collect ethnicity data, employee ethnicity declaration rates can be below 50% and many employers report that their workforce expressed concerns about how the data would be used.
There are many factors behind this. The EHRC found that in terms of collecting data on employees’ ethnicity, just under a third of employers stated that collecting the data is too intrusive; 27% reported that employees do not want to share the information; and 20% stated that collecting it is too onerous.
And once collected, analysing ethnicity data can be complex because identifying as a member of a particular ethnic group is self-defined by the individual themselves and is therefore subjective. Some individuals report that they have difficulty completing questionnaires which ask for their ethnic identity because they do not associate themselves with any of the categories or because they associate themselves with more than one category.
...employers report that their workforce expressed concerns about how the data would be used
Will disability pay reporting follow?
The EHRC research found that reporting on the disability status of the workforce is less common than reporting a worker’s ethnicity, but when it does occur employers tend to use binary categories (disabled and non-disabled). This is often because of concerns around confidentiality and the need to avoid identifying individuals in reporting. The organisations that are most successful in encouraging staff to share information on ethnicity and disability put significant effort into encouraging employees to provide information and explaining how they will use the data.
Allowing for the fact that data is scarce, analysis by the Trades Union Congress (TUC) at the end of 2018 found that the average disability pay gap stands at around 15%. That’s the equivalent of being paid nearly £3k (£2,821) less a year. And the TUC reports that the pay penalty is even higher for some disabled people; those with ‘depression or bad nerves’ are paid around 26% less, and those with ‘mental illness, phobia or panics’ are paid on average nearly 30% less than non-disabled people.
Align this pay disparity with the TUC’s assertion that disabled people have an employment rate that is 30% lower than the non-disabled and it is clear that there is a long way to go before pay parity is achieved.
So far, although the government has consulted on how ethnicity pay should be reported, no consultation has been forthcoming on the reporting of disability pay. Instead, back in November 2018, the government published a two-page voluntary reporting framework calling on large employers to report on the number of disabled employees they employ.
...closing the disability and ethnicity pay gaps will be slow
Is voluntary reporting the answer?
The framework was developed by the government in partnership with large employers and expert partners (including leading charities) to support organisations to record and voluntarily report information on disability, mental health and wellbeing in the workplace. But the key word here is voluntary. Employers are under no obligation to do the right thing and report their disability pay gaps.
The government has committed itself to reducing the disability pay gap in the same way that it is committed to reducing the gender and ethnicity pay gaps so it is unclear why it has introduced a voluntary reporting framework for disability pay reporting rather than exploring mandatory reporting options.
Voluntary reporting doesn’t have a convincing track record. A voluntary scheme for gender pay gap reporting was introduced by the coalition government in 2011 with almost 300 businesses signing up, but only seven businesses actually went on to publish their data. Yet when mandatory gender pay reporting was introduced more than 10,000 employers reported their gender pay gap – close to 100% compliance.
It is clear that without a legally binding requirement on companies to publish their pay gaps – and what action they are taking to address them – progress towards closing the disability and ethnicity pay gaps will be slow.
Being open and transparent about pay has forced organisations to identify and address the poor workplace practices which have led to gender inequality. Let’s hope that it isn’t long before all other pay inequalities are identified and addressed too.